General Assembly Retirement System

of the State of Illinois

Auditors' Report and Financial Audit
For the Year Ended June 30, 2010
Performed as Special Assistant Auditors for
the Auditor General, State of Illinois

8KD",

CPAs & Advisors

 General Assembly Retirement System
of the State of Illinois
Financial Audit

For the Year Ended June 30, 2010

Contents

Financial Statement Report

Independent Auditors' Report ............................................................................................................. 1

Management's Discussion and Analysis .............................................................................................3

Statements of Plan Net Assets ............................................................................................................ 5

Statements of Changes in Plan Net Assets ..........................................................................................6

Notes to Financial Statements ............................................................................................................. 7

Required Supplementary Information

Schedule of Funding Progress ........................................................................................................... 19

Schedule of Employer Contributions ................................................................................................ 19

Notes to Required Supplementary Information ................................................................................ 19

Supplementary Financial Information

Summary of Revenues by Source .....................................................................................................20

Schedule of Payments to Consultants and Advisors ......................................................................... 20

Summary Schedule of Cash Receipts and Disbursements ................................................................21

Independent Accountants' Report on Internal Control over Financial

Reporting and on Compliance and Other Matters Based on the Audit

of the Financial Statements Performed in Accordance with Government

Auditing Standards......................................................................................................... 22

Current Finding .................................................................................................................24

Schedule of Prior Finding Not Repeated .......................................................................... 25

 General Assembly Retirement System

of the State of Illinois

Financial Statement Report Summary

June 30, 2009

Summary

The audit of the accompanying financial statements ofthe General Assembly Retirement System of
the State of Illinois was performed by BKD, LLP.
Based on their audit, the auditors expressed an unqualified opinion on the General Assembly
Retirement System ofthe State ofI11inois' financial statements.
 225 N. Water Street, Suite 400
P.O. Box 1580
Decatur, IL 62525-1580
CPAs & Advisors 217.429.2411 Fax217.429.6109 www.bkd.com

Independent Auditors' Report

The Honorable William G. Holland

Auditor General
State of lIIinois
and
Board ofTrustees
General Assembly Retirement System ofthe State of Illinois

As Special Assistant Auditors for the Auditor General, we have audited the accompanying statement of
plan net assets ofthe General Assembly Retirement System of the State of Illinois (System), as of
June 30,2010 and 2009, and the related statement of changes in plan net assets for the year then ended, as
listed in the table of contents. These financial statements are the responsibility of the System's
management. Our responsibility is to express an opinion on these financial statements based on our audit.
We did not audit the 2010 and 2009 financial statements of the Illinois State Board of Investment, an
internal investment pool ofthe State of Illinois, which statements represent 92 percent, 94 percent, and 28
percent, respectively in 2010, and 86 percent, 87 percent, and 359 percent, respectively, in 2009 oftotal
assets, net assets held in trust for pension benefits, and total additions ofthe System. Those financial
statement were audited by other auditors whose report thereon has been furnished to us, and our opinion,
insofar as it relates to the amounts included for the Illinois State Board of Investment is based on the
report of the other auditors.

We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General ofthe United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the plan
net assets ofthe System as ofJune 30, 20] 0 and 2009, and the changes in its plan net assets for the year
then ended in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated February 17,
2011 on our consideration ofthe System's internal control over financial reporting and on our tests of its
compliance with certain provisions oflaws, regulations, contracts and grant agreements and other matters.
The purpose ofthat report is to describe the scope of our testing of internal control over financial
reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal
control over financial reporting or on compliance. That report is an integral part of an audit performed in
accordance with Government Auditing Standards and should be considered in assessing the results of our
audit.
Page 1

Praxiix';
experience BKD
MEMBER "
GLOBAL ALLIANCE OF
INDEPENDENT FIRMS
The accompanying management's discussion and analysis and schedules offunding progress and
employer contributions and accompanying notes as listed in the table of contents are not a required part of
the basic financial statements but are supplementary information required by accounting principles
generally accepted in the United States of America. We have applied certain limited procedures, which
consisted principally of inquiries of management regarding the methods of measurement and presentation
ofthe required supplementary information. However, we did not audit the information and express no
opinion on it.

Our audit was conducted for the purpose offorming an opinion on the financial statements that comprise
the System's basic financial statements. The supplementary financial information as noted in the table of
contents is presented for purposes of additional analysis and is not a required part of the basic financial
statements. The supplementary financial information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material
respects, in relation to the basic financial statements as of and for the years ended June 30, 201 Oand 2009,
taken as a whole.

February 17,2011

Page 2
 MANAGEMENT'S DISCUSSION AND ANALYSIS

This financial This section presents management's discussion and 3. Required Supplementary Information. The
report is designed analysis of the financial position and performance of required supplementary information consists of two
the General Assembly Retirement System (System) schedules and related notes concerning actuarial in­
to provide a
for the years ended June 30, 2010 and 2009. It is formation, funded status and required contributions
general overview presented as a narrative overview and analysis.
for the System.
of the General
Assembly Retire­ The System is a defined benefit, single-employer 4. Other Supplementary Schedules. Other supple­
public employee retirement system. It provides mentary schedules include more detailed informa­
ment System's
services to 182 active participants and 398 benefit tion pertaining to the System, including schedules of
finances for all
recipients. Throughout this discussion and analysis revenues by source, cash receipts and disbursements,
those with an units of measure (i.e. billions, millions, thousands) and payments to consultants.
interest in the are approximate, being rounded up or down to the
System's finances. nearest tenth of the respective unit value.
FINANCIAL HIGHLIGHTS
OVERVIEW OF THE FINANCIAL • The System's net assets decreased by approximately
$401.0 thousand and $20.3 million during fiscal
STATEMENTS years 2010 and 2009, respectively. These changes
This discussion and analysis is intended to serve as were primarily due to a $4.3 million decrease in
an introduction to the System's financial reporting cash and receivables partially offset by a $3.9 million
which is comprised of the following components: increase in investments (excluding securities lending
collateral) during fiscal year 2010 and a $24.2 million
1. Basic Financial Statements. For the fiscal years decrease in investments partially offset by a $3.0 mil­
ended June 30, 2010 and 2009, basic financial state­ lion increase in receivables during fiscal year 2009.
ments are presented for the System. This information • The System was actuarially funded at 26.3% as of
presents the net assets held in trust for pension ben­ June 30, 2010 which is a decrease from 29.2% as of
efits for the System as of June 30, 2010 and 2009. This June 30, 2009. For fiscal years 2010 and 2009, the
financial information also summarizes the changes in actuarial value of assets equals the fair value of assets
net assets held in trust for pension benefits for the adjusted for any actuarial gains or losses from invest~
years then ended. ment return incurred in the fiscal year recognized in
equal amounts over the five year period following
2. Notes to the Financial Statements. The notes to that fiscal year.
the financial statements provide additional informa­ • The overall rate of return forthe Illinois State Board
tion that is essential to achieve a full understanding . of Investment (lSBI) Commingled Fund was 9.1%
of the data provided in the basic financial statements. for fiscal year 2010 compared to negative 20.1 % for
fiscal year 2009.

The condensed Statements of Plan Net Assets reflect the resources available to pay ADDITIONS TO PLAN NET
benefits to members, including retirees and beneficiaries, at the end of the years
reported. A summary ofthe System's Plan Net Assets is presented below.
ASSETS
Additions to Plan Net Assets in­
Condensed Statements of Plan Net Assets
clude employer and participant
(in thousands)
contributions and net income from
Increase!(Decrease)
from investment activities. Participant
As of June 30, 2009 to 2008 to contributions were approximately
2010 2009 2008 2010 2009 $1.7 million forthe years ended June
30, 2010 and 2009. Participant con­
Cash $ 3,099.4 $ 3,705.7 $ 2,823.3 $ (606.3) $ 882.4 tribution rates are set by statute as a
Receivables 50.0 3,777.5 732.4 (3,727.5) 3,045.1 percentage of gross salary. Employer
contributions increased to $10.4
Investments, at fair value * 52,781.6 47,693.7 71,923.9 5,087.9 (24,230.2)
million in 2010 from $8.9 million in
EqUipment, net 1.9 1.7 2.1 0.2 (0.4) 2009. This increase was the result of
Total assets 55,178.6 75,481.7 754.3 (20,303.1) the State's funding plan.
Liabilities * 86.5 75.8 1,155.3 10.7
Total plan net assets .1 $ 55,092.1 $ 75,405.9 $ (401.0) $(20,313.8)

* Including securities lending collateral

General Assembly Retirement System, State of Illinois................................................................... .

3
 MANAGEMENT'S DISCUSSION AND ANALYSIS

DEDUCTIONS FROM PLAN NET ASSETS INVESTMENTS Questions

Deductions from Plan Net Assets are primarily benefit Investments of the System are combined in a com- concerning any of
payments. During 2010 and 2009, the System paid mingled investment pool with the Judges' Retirement the information
out $17.0 million and $15.9 million, respectively, in System and the State Employees' Retirement System. provided in
benefits and refunds. an increase of 6.7% from 2009. Each system owns an equity position in the pool thO t
.. . Isrepor or
These higher payments were mainly due to higher and receives proportionate Investment Income from
employee salaries on which the payments are based the pool in accordance with respective ownership requests for
as well as a 3% automatic annuity increase paid each percentage. Investment gains or losses are reported additional
year. The administrative costs of the System repre­ in the Statement of Changes in Plan Net Assets of financial
sented 1.6% and 1.7% of total deductions in 2010 each retirement system. information should
and 2009. respectively. be addressed to
The net investment income of the total ISBI Com­
mingled Fund was approximately $846.2 million the General
FUNDED RATIO during fiscal year 2010, versus a net investment loss Assembly
The funded ratio of the plan measures the ratio of net
of $2.354 billion during fiscal year 2009, resulting Retirement
assets against actuarially determined liabilities and is
in returns of 9.1 % and negative 20.1 %, respectively. System,
one indicator of the fiscal strength of a pension fund's
For the three, five, and ten year period ended June Accounting
ability to meet obligations to its members. An annual
30, 2010, the ISBI Commingled Fund earned a com- O...
actuarial valuation is required by statute. The most . 65o/c .. IVISlon,
pounded rate of return 0 f negative . 0, POSitive
recent available valuation showed the funded status
1.2%, and positive 1.7%, respectively. 2101 S. Veterans
of the System on June 30, 2010 decreased to 26.3% Parkway,
from 29.2% at June 30, 2009. The major reason for The IS81 is exposed to general market risk. This P. O. Box 19255,
the decline was the lingering effect of prior invest­ general market risk is reflected in asset valuations S . f' Id III' .
ment performance on the smoothed market value of .
fluctuating With ny 'Impact from pnng Ie , 1n00S
. market vo Iatl'1'tty. A
assets. The amount by which actuarially determined market volatility on the IS81's investment portfolio 62794
liabilities exceeded the actuarial value of assets was depends in large measure on how deep the market
$185.6 million at June 30, 2010 compared to $173.6 downturn is, how long it lasts, and how it fits within
million at June 30,2009. fiscal year reporting periods. The resulting market
risk and associated realized and unrealized gains and
losses could significantly impact the IS81's financial
condition.

The condensed Statements of Changes in Plan Net Assets reflect the changes in the resources
available to pay benefits to members, including retirees and beneficiaries.
Condensed Statements of Changes in Plan Net Assets
(in thousands)
Increase!(Decrease)
from
For the Year Ended June 30, 2009 to 2008 to
2010 2009 2008 2010 2009
Additions
Participant contributions $ 1,680.6 $ 1,697.6 $ 1,772.9 $ (17.0) $ (75.3)
Employer contributions 10,411.3 8.856.4 6.809.8 1.554.9 2.046.6
Investment
income! (loss) (14,662.3) (4.708.3) 19,432.8 (9,954.0)
Total additions/(deductions) (4,108.3) 3,874.4 20,970.7 (7,982.7)
Deductions

Benefits
16,769.0 15,857.2 15,258.6 911.8 598.6
Refunds
222.1 71.6 147.8 150.5 (76.2)
Administrative expenses
776 7 ~42 __ __~(~4~4~) _ ___~32~5~
Total deductions
16,205.5 15.650.6 1,057.9
Net (decrease)

in plan net assets

$(20,313.8) $ (11 ,776.2) =====~ ===:::::::::::::::::::::

General Assembly Retirement System, State of Illinois................................................................... .

4
 FINANCIAL STATEMENTS

GENERAL ASSEMBLY RETIREMENT SYSTEM,

STATE OF ILL! NOIS
Statements of Plan Net Assets
June 30, 2010 and 2009

2010 2009
Assets

Cash $ 3,099.436 $ 3,105,651

Receivables:
Employer contributions 3,686,250
Participants' contributions 41,141 85,561
Refundable annuities 422 2,909
Interest on cash balances 2,152
Total receivables 3,111.412

Investments - held in the Illinois State Board of

Investment Commingled Fund at fair value 41,693.153
Securities lending collateral with State Treasurer

Equipment, net of accumulated depreciation 1.867 J 6w.1

Total Assets 55,932,904 55.118.511

liabilities

Benefits payable
Administrative expenses payable 30,701
Due to Judges' Retirement System of Illinois 55,145
Securities lending collateral
Total liabilities 86.452

Net assets held in trust for pension benefits $ 55,092,125

See accompanying notes to financial statements.

General Assembly Retirement System, State of Illinois....................................................................

5
 FINANCIAL STATEMENTS

GENERAL ASSEMBLY RETIREMENT SYSTEM,

STATE OF ILLINOIS
Statements of Changes in Plan Net Assets
Years Ended June 30, 2010 and 2009

2010 2009
Additions:
Contributions:
Participants $ 1,680,603 $ 1,697,575
Employer 10,411,274 8,856,422
Total contributions 12,091,877 10,553,997

Investments:
Net investment income 1,157,595 1,411.133
Interest earned on cash balances 21,974 67.905
Net appreciation (depreciation)
in fair value of investments 3,590,964 (16,141,323)
Total investment income (loss) 4,770,533 (14,662,285)

Total Additions (Deductions) 16.862,410 (4,108.288)

Deductions:
Benefits:
Retirement annuities 13,770.131 13,020,316
Survivors' annuities 2.998,901 2.836,903
Total benefits 16,769,032 15,857,219
Refunds of contributions 222,094 71,589
Administrative expenses 276,722

Total Deductions 17,263,379 16,205,530

Net Decrease (400,969) (20,313,818)

Net assets held in trust for pension benefits:

Beginning of year 55,092,125 75,405,943

End of year $ 54,691,156 $ 55,092,125

See accompanying notes to financial statements.

General Assembly Retirement System, State of Illinois.. ........ ..... .............. ........ ... ........................... .
6
 FINANCIAL STATEMENTS

GENERAL ASSEMBLY RETIREMENT SYSTEM,

STATE OF ILLINOIS

Notes to Financial Statements June 30, 2010 and 2009

1. Reporting Entity Pursuant to federal tax law and regulations govern­

Generally accepted accounting principles require that
the financial reporting entity include (1) the primary
government (2) organizations for which the primary
government is financially accountable and (3) other
organizations for which the nature and significance
oftheir relationship with the primary government are
such that exclusion would cause the reporting entity's
financial statements to be misleading or incomplete.
The General Assembly Retirement System (System)
is administered by a Board of Trustees consisting of
seven persons, which include the President of the Sen­
ate, ex officio, or his designee, two members of the
Senate appointed by the President of the Senate, three
members of the House of Representatives appointed
by the Speaker of the House of Representatives, and
one person elected from the member annuitants.
Based on the criteria of the Governmental Account­
ing Standards Board Statement No. 14, there are no
other state agencies, boards or commissions, or other
organizations required to be combined with the Sys­
tem, however, the System is considered to be part of
the State of Illinois financial reporting entity. and is
to be combined and included in the State of Illinois'
comprehensive annual financial report.
ing the administration of public employee pension
plans, the System has established a separate fund for
the soie purpose of paying benefits in accordance
with Section 415 of the Internal Revenue Code. The
receipts and disbursements from the fund for fiscal
years 2010 and 2009 were each less than $26.000.
Due to the immaterial nature of the separate fund,
these receipts and disbursements have been included
in the System's financial statements.
2. Plan Description
The System is the administrator of a single-employer
defined benefit public employee retirement system
(PERS) established and administered by the State of
Illinois to provide pension benefits for its participants.
a. Eligibility and Membership
The General Assembly Retirement System covers
members of the General Assembly of the State and
.persons elected to the offices of Governor, lieutenant
Governor. Secretary of State. Treasurer, Comptroller
and Attorney General for the period of service in
such offices and the Clerks and Assistant Clerks of the
respective Houses of the General Assembly. Participa­
tion by eligible persons is optional.

b. Contributions
In accordance with Chapter 40 Section 5/2-126 of
the Illinois Compiled Statutes,
At June 30, 2010 and 2009, the System membership consisted of:
participants contribute specified
percentages of their salaries for
2010 2009
retirement annuities, survivors'
Retirees and beneficiaries
annuities and automatic an­
currently receiving benefits:
nual increases as shown on the
Retirement annuities 278 275
next page. Contributions are
Survivors' annuities 119 125
excluded from gross income for
Reversionary annuities
Federal and State income tax
398 401
purposes.
I nactive participants entitled to benefits
but not yet receiving them 73 78
The statutes governing the
Total 471
General Assembly Retirement
Current participants:
Vested 139 139

Nonvested 43 42

Total 182 181

Operation of the System and the direction of its policies are the
responsibility of the Board of Trustees.

General Assembly Retirement System, State of Illinois................................................................... .

7
 FINANCIAL STATEMENTS
The total contribution rate is 11.5% as shown below:
8.5% Retirement annuity
2.0% Survivors' annuity
1.0% Automatic annual increases
System provide for optional contributions by partici­
pants, with interest at prescribed rates, to retroactively
establish service credits for periods of prior creditable
service.
The Board of Trustees has adopted the policy that
interest payments by a participant, included in op­
tional contributions to retroactively establish service
credits, shall be considered an integral part of the
participant's investment in annuity expectancies and,
as such, shall be included as a part of any refund
payable.
The payment of (1) the required State contributions,
(2) all benefits granted under the System and (3) all
expenses in connection with the administration and
operation thereof are the obligations of the State to
the extent specified in Chapter 40, Article 5/2 of the
Illinois Compiled Statutes.
c. Benefits
After eight years of credited service, participants have
vested rights to retirement benefits beginning at
age 55, or after four years of service with retirement
benefits beginning at age 62.
The retirement annuity is determined according to
the formula in the box below based upon the partici­
pants' final rate of salary. The maximum retirement
annuity payable is 85% of the final rate of salary.
The General Assembly Retirement System also pro­
vides annual automatic annuity increases for retirees
and survivors, survivors' annuity benefits, reversion­
ary annuity benefits, and under specified conditions,
lump-sum death benefits. Participants who terminate
service may receive, upon application, a refund of
their total contributions.
3.0% for each of the first 4 years of service
3.5% for each of the next 2 years of service
4.0% for each of the next 2 years of service
4.5% for each of the next 4 years of service
5.0% for each year of service in excess of 12 years
General Assembly Retirement System, State of Illinois................................................................... .
8
3. Summary of Significant Accounting
Policies and Plan Asset Matters
a. Basis of Accounting
The financial transactions of the System are main­
tained and these financial statements have been
prepared using the accrual basis of accounting in
conformity with generally accepted accounting
principles.
Participant and employer contributions are recog­
nized as revenues when due pursuant to statutory
requirements. Benefits and refunds are recognized
as expenses when due and payable in accordance
with the terms of the plan.
b. Cash
The System retains all of its available cash in a com­
mingled investment pool managed by the Treasurer
of the State of Illinois (Treasurer). All deposits are
fully collateralized by the Treasurer.
"Available cash" is determined to be that amount
which is required for the current operating expendi­
tures of the System. The excess of available cash is
transferred to the Illinois State Board of Investment
(ISBI) for purposes of long-term investment for the
System.
c. Implementation of New Accounting Standards
GASB Statement No. 51, Accounting and Financial
Reporting for Intangible Assets, establishes accounting
and financial reporting requirements for intangible as­
sets (including certain internally developed software).
All intangible assets not specifically excluded by the
scope of this Statement should be classified as capital
assets. All existing authoritative guidance for capital
assets should be applied to those intangible assets, as
applicable. The System implemented this Statement for
the year ending June 30, 2010.
GASB Statement No. 53, Accounting and Financial Re­
porting for Derivative Instruments, issued June 2008,
was effective for the ISBI beginning with its year ending
June 30, 2010. This Statement addresses the recognition,
measurement, and disclosure of information regarding
derivative instruments entered into by the state and local
governments. Derivative instruments are often complex
financial arrangements used by governments to manage
specific risks or to make investments.
d. New Accounting Pronouncement
GASB Statement No. 59, Financial Instruments Omni­
bus, was established to update and improve existing
standards regarding financial reporting and disclo­
sure requirements of certain financial instruments and
 FINANCIAL STATEMENTS

external investment pools for which significant issues
have been identified in practice. The ISBI is required
to implement this Statement for the year ending June
30, 2011. ISBI management has not yet completed
their assessment of this Statement; however, it is not
expected to have a material effect on the overall
financial statement presentation.
e. General Litigation
The System is subject to claims and lawsuits that
arise primarily in the ordinary course of business. It
is the opinion of management that the disposition or
ultimate resolution of such claims and lawsuits will
not have a material adverse effect on the plan net
assets or the changes in plan net assets of the System.
f. Methods Used to Value Investments
Investments are managed by the ISBI pursuant to
Chapter 40, Article 5/22A of the Illinois Compiled
Statutes (ILCS) and are maintained in the ISBI Com­
mingled Fund.
Investments owned are reported at fair value as
follows: (1) U.S. Govemment and Agency, Foreign
and Corporate Obligations, Convertible Bonds ­
prices quoted by a major dealer in such securities;
(2) Common Stock and Equity Funds, Preferred Stock,
Foreign Equity Securities, Forward Foreign Currency
Contracts and Options: (a) Listed - closing prices
as reported on the composite summary of national
securities exchanges; (b) Over-the-counter - bid
prices; (3) Money Market Instruments - average
cost which approximates fair values; (4) Real Estate
g. Actuarial Experience Review
In accordance with Illinois Compiled Statutes, an
actuarial experience review is to be performed at
least once every five years to determine the adequacy
of actuarial assumptions regarding the mortality,
retirement, disability, employment. turnover, inter­
est and earnable compensation of the members and
beneficiaries of the System. An experience review was
last performed as of June 30, 2005 resulting in the
adoption of new assumptions as of June 30, 2006.
h. Administrative Expenses
Expenses related to the administration of the Sys­
tem are financed through investment earnings and
employer retirement contributions. These expenses
are budgeted and approved by the System's Board
ofTrustees.
Administrative expenses common to the General As­
sembly Retirement System and the Judges' Retirement
System are allocated 30% to the General Assembly
Retirement System and 70% to the Judges' Retirement
System.
Invoices/vouchers covering common expenses in­
curred are paid by the Judges' Retirement System,
and the appropriate amount is allocated to and
reimbursed by the General Assembly Retirement
System. Administrative expenses allocated to and
reimbursed by the General Assembly Retirement
System as of June 30, 2010 and 2009, were $208,978
and $204,009, respectively.
i. Risk Management

Investments fair values as determined by the ISBI

The System, as part of the primary government of

and its investment managers; and (5) Alternative

the State, provides for risks of loss associated with

Investments (Private Equity, Hedge Funds, and

workers' compensation and general liability through

Infrastructure Funds) - fair values as determined

the State's self-insurance program. The System ob­

by the ISSI and its investment managers; and (6)

tains commercial insurance for fidelity, surety, and

Commingled Funds fair values as determined by

property. There have been no commercial insurance

the ISSI and its investment managers.

claims in the past three fiscal years.

Units of the ISSI Commingled Fund are issued to the

j. Use of Estimates

member systems on the last day of the month based

In preparing financial statements in conformity with

on the unit net asset value calculated as of that date.

U.S. generally accepted accounting principles, the

Net investment income of the ISSI Commingled Fund

System makes estimates and assumptions that af­

is allocated to each of the member systems on the

fect the reported amounts of assets and liabilities

last day of the month on the basis of percentage of

and disclosures of contingent assets and liabilities at

accumulated units owned by the respective systems.

the date of the financial statements, as well as the

Management expenses are deducted monthly from

reported amounts of revenue and expenses during

income before distribution.

the reporting period. Actual results could differ from

The investment authority of the ISBI is provided in those estimates and assumptions.

Chapter 40, Section 5/22A-112 of the ILCS. Such

k. Reclassifications

investment authority requires that all opportunities

Certain fiscal year 2009 amounts have been reclassi­

be undertaken with care, skill, prudence and dili­

fied to conform to the fiscal year 2010 presentation.

gence given prevailing circumstances that a prudent

These reclassifications have not changed the fiscal

person acting in like capacity and experience would

year 2009 results.

undertake.

General Assembly Retirement System, State of Illinois....................................................................

9
 FINANCIAL STATEMENTS

4. Investments financial statement presentation and

Summary of the IS81 Fund's investments at fair value by type
June 30, 2010 June 30, 2009
Government and agency obligations $ 810,739,312
Foreign obligations
44.409,906
Corporate obligations 925,668,388
Common stock & equity funds 2,857,144,559
Preferred stock 517,676
Foreign equity securities 1.733,177,670
Foreign preferred stock 179,924
Commingled funds
270,510,642
Hedge funds 917,854,201
Real estate funds
750.210.957
Private equity 542.441,291
Money market instruments 270,231,935
Infrastructure funds 320,293,041
Bank loans 222,623,999
Forward foreign currency contracts (266.410)
Total investments $ 9,665,737,091
Custodial Credit Risk for Investments
The custodial credit risk for investments is the risk
that, in the event of the failure of the counterparty
to a transaction, the IS81 will not be able to recover
the value of investments or collateral securities that
are in the possession of a counterparty. As of June
30, 2010 and 2009, common stock investments that
were uninsured and unregistered, with securities
held by the counterpart or by its trust department
or agent but not in the IS81's name totaled $0 and
$2,529.488, respectively.
Deposits
Custodial credit risk for deposits is the risk that,
in the event of a financial institution failure, the
System's and ISBl's deposits may not be returned.
All non-investment related bank balances at year
end are insured or collateralized with securities held
by the Illinois State Treasurer or agents in the name
of the State Treasurer. Cash held in the investment
related bank account by ISBI is neither insured nor
collateralized for amounts in excess of $250,000.
During fiscal year 2007, a Credit Risk Policy was
implemented by the ISBI staff and formally adopted
by the IS81 Board in July, 2007. The poliCY outlines the
control procedures used to monitor custodial credit
risk. These assets are under the custody of State
Street Bank and Trust. State Street Bank and Trust
has a AA Long-term Deposit/Debt rating by Standard
& Poor's and an Aa2 rating by Moody. Certain
investments of the ISBI with maturities of 90 days
or less would be considered cash equivalents; these
consist of short-term investment funds and U.S.
Treasury bills with maturities of 90 days or less,
which are not subject to the custodial credit risk. For
investment purposes. the ISBI reports
these types of cash equivalents as
Money Market Instruments within
their investments. As of June 3D, 2010
$ 665,018,889
and 2009, the ISBI had investment
33,237,090
related bank balances of $3,630,043
668,047,761
and $12.440,740, respectively. These
2,610.218,733
balances had no exposure to custodial
286.429
credit risk due to participation in
1.482,594,431
the FDIC's Transaction Account
47,856
Guarantee Program.
335.484,184
880,939,190
Securities Lending
875,929,700
The IS81 participates in a securities
450.491,810
lending program with State Street
235,126.490
who acts as securities lending agent.
305,969,947
Securities are loaned to brokers and,
197,259,098
in return, the ISBI has rights to a
(5,594,545)
portion of a collateral pool. All of the
$ 8,735,057,063
securities are eligible for the securities
lending program. Collateral consists
solely of cash, letters of credit, commercial paper and
government securities having a fair value equal to or
exceeding 102% of the value of the loaned securities
(105% forrion-U.S. securities). In the event of borrower
default, State Street provides the ISBI with counterparty
default indemnification. The ISBI had no credit risk as a
result of its securities lending program as the collateral
received exceeded the fair value of the securities loaned.
As of June 30, 2010and 2009, there were outstanding
loaned investment securities having fair values of
$1,055,476,733 .and $1,476,903,266, respectively;
against which collateral was received with a fair value
of $1,091,589,381 and $1,528,744,414, respectively.
Collateral received at June 30, 2010 and 2009 consisted
of $1,010,115,059 and $1,467,250,961, respectively, in
cash and $81,474,322 and $61,493,453, respectively, in
securities for which the ISBI does not have the ability
to pledge or sell.
The cash collateral received is invested in a short term
investment pool having a fair value of $997,638,887
and $1,395,768,803 as of June 30, 2010 and 2009,
respectively. This investment pool had an average
duration of 12.45 days and 42.64 days as of June 30,
2010 and 2009, respectively. Any decrease in the fair
value of invested cash collateral is recorded by the ISBI
as unrealized losses and reported as a component of
the investment income/loss on the ISBl's Statement of
Changes in Net Assets. Regarding the investment pool,
at the time of purchase, all securities with maturities
of 13 months or less must qualify as first-tier securities
and all securities with maturities in excess of 13 months
will be rated A or better by at least one nationally
recognized statistical rating organization (NRSROs)
or if unrated, be determined by State Street to be of
comparable quality.

General Assembly Retirement System, State of Illinois....................................................................

10
 FINANCIAL STATEMENTS

Concentration
of Credit Risk Moody's
and Credit Risk Quality Rating 2010 2009
for Investments Government and agency obligations
The ISBI's U.S. Government obligations and AAA $ 785,753,044 $ 653,019,129
portfolio is Federal agency obligations AA 11,999,760
managed by A 11,999,760
professional Not Rated 12,986,508
investment Total Government and agency obligations $ 810,739,312 $ 665,018,889
management
firms, These Foreign obligations AAA $ $ 7,009,777
investment AA 1.601.595 3,433,768
management A 13,951,076
firms are BAA 10.108,205 1,899,728
required to BA 11,475,920 10,915,077
maintain B 5,659,170 7,765,165
diversified CAA 1,609,335
portfolios. Each C 604,240
investment Not rated 1,013.940

manager must Total foreign obligations $ 44,409,906

comply with risk

man age men t Corporate obligations AAA $ 43,798,021 $ 39,162,888
guidelines AA 78,359,254 56,839,344
individually A 272.476,793 209,758,077
assigned to BAA 201,122,004 99.409,888
them as part of BA 85,333,142 79,410,130
their investment B 188,825,884 132,204,912
management CAA 38,250,212 39.940,421
agreement. CA 977.375
The ISBI did Not rated 10,344.126
not have any Total corporate obligations $ 668,047,761
single issuer
investment that exceeded 5% of the total net assets portfolio. A foreign currency forward contract is an
of the fund as of June 30, 2010 and 2009. The table agreement to buy or sell a specific amount of a foreign
at right presents the quality ratings of debt securities currency at a specified delivery or maturity date for an
held by the ISBI as of June 30, 2010 and 2009. agreed-upon price. Fluctuations in the market value
of foreign currency forward contracts are marked
Derivative Securities to market on a daily baSis. These investments are
During the year ended June 30, 2010, the ISBI reported at fair value in the investment section of the
implemented GASB Statement No. 53 Accounting and ISBI's Statement of Net Assets. The gain or loss arising
Financial Reporting for Derivative Instruments with from the difference between the original contracts
respect to investments held in derivative securities. and the closing of such contracts is recognized in the
A derivative security is an investment whose payoff net increase/decrease in the fair value of investments
depends upon the value of other assets such as in the ISBl's Statement of Changes in Net Assets.
commodity prices, bond and stock prices, or a market
index. The ISBI invests in derivative instruments The ISBI's investment managers use financial futures
including forward foreign currency contracts, to replicate an underlying security they wish to hold
futures, rights and warrants. The ISBl's derivatives (sell) in the portfolio. In certain instances, it may be
are considered investment derivatives. The fair value beneficial to own a futures contract rather than the
of all derivative finanCial instruments is reported in underlying security (arbitrage). A financial futures
the ISBI's Statement of Net Assets as either assets or contract is an agreement to buy or sell a specific
liabilities, and the change in the fair value is recorded amount at a specified delivery or maturity date for
in the ISBl's Statement of Changes in Net Assets as a an agreed-upon price. As the fair values of the futures
net increase/decrease in the fair value of investments. contract vary from the original contract price, a gain
or loss is recognized and paid to or received from the
Foreign currency forward contracts are used to protect clearinghouse. The gain or loss is recognized in the
against the currency risk in the ISBI's foreign equity net increase/decrease in the fair value of investments

General Assembly Retirement System, State of Illinois....................................................................

11
 FINANCIAL STATEIVIENTS

in the IS81's Statement of Changes in Net Assets. Futures pOSitions held by the ISBI
Financial futures represent an off·balance sheet as of June 30, 2010 and 2009
obligation, as there are no balance sheet assets or
liabilities associated with those contracts. The cash 2010
Number of Contract Fair
or securities to meet these obligations are held in the
Contracts Principal* Value
ISBl's investment portfolio.
Equity futures

purchased 1,026 $ 52,664.580 $ (2,586.651)

Rights and warrants allow the IS81 investment

managers to replicate an underlying security they 2009
wish to hold (sell) in the portfolio. Rights and Number of Contract Fair
warrants provide the holder with the right, but not Contracts Principal' Value
the obligation, to buy or sell a company's stock at Equity futures
a predetermined price. Rights usually expire after purchased 1,626 $ 74.430,150 $ (1,415,899)
a few weeks and warrants can expire from one to • Contract principal amounts shown represent the market value of the underlying
several years. Under certain circumstances, a type of assets the contracts control. These are shown to present the volume of the trans·
warrant called Participatory Notes or P·Notes are used actions but do not reflect the extent to which positions may offset one another.
in the portfolio by the ISBl's investment managers These amounts do not represent the much smaller amounts potentially subject
that are not registered to trade in domestic Indian to risk. Contract principal values also do not represent actual recorded values
Capital Markets. Participatory Notes are issued by reported in the IS81's Statement of Net Assets.
Indian based brokerage firms against an underlying
Indian security permitting holders to get a share in The ISBI's derivative investments in foreign currency
the income from the security. These investments are forward contracts are held with counterparties. The
reported at fair value in the investment section of the credits ratings and net exposure as of June 30, 2010
ISBl's Statement of Net Assets within the common for the counterparties are as follows:
stock and foreign equity classifications. The gain or
loss associated with rights and warrants is recognized
in the net increase/decrease in the fair value of Moody's Fair Net Percentage of
investments in the ISBI's Statement of Changes in Rating • Value Exposure Net Exposure
Net Assets. 97%
A $ 2.478.451 $ 2.478.451
AA 69,204 69.204 3
The fair values of the forward contracts are estimated
based on the present value of their estimated future $ 2,547.655 $ 2.547,655 100%
--
cash flows. , Ratings as of June 30. 2009 are not available
Futures contracts are exchange traded instruments
Derivative transactions involve, to varying degrees,
where the fair value is determined by the equilibrium
credit risk and market risk. Credit risk is the possibility
between the forces of supply and demand. The fair
that a loss may occur because a party to a transaction
value of a right or warrant closely tracks the intrinsic
fails to perform according to terms. Derivatives which
value of the underlying stock and can be determined
are exchange traded are not subject to credit risk. No
either by formulaic methodology (most commonly
derivatives held are subject to custodial credit risk.
Black-Scholes) or intrinsic value methodology.
Market risk is the possibility that a change in interest
(interest rate risk) or currency rates (foreign currency
The table below presents the investment derivative
risk) will cause the value of a financial instrument to
instruments aggregated by type that were held by
decrease or become more costly to settle. The market
the ISBI as of June 30, 2010:
risk associated with derivatives, the prices of which are

Changes in Fair Value Fair Value at Year End Notional Amount

2010 2009 2010 2009 2010 2009
FX Forwards $ 4,751,552 $ 3,509,993 $ (266,410) $ (5,594,545) $ N/A $ N/A
Futures 11,874,002 (31 ,537,188) (2,586,651) (1,415,899) 51,300 81,300
Rights 1,184,339 544,848 227,807 465,233 905,044 581,222
Warrants 12,100,555 {6,839,300} 65,373,110 41,247,000 3,391,468 4,259,850
$ 29,910,448 $(34,321 ,647) $ 62,747,856 $ 34,7m,789 $ 4,347,812 $4,922,372

General Assembly Retirement System, State of Illinois................................................................... .

12
 FINANCIAL STATEMENTS

constantly fluctuating, is regulated by imposing strict
limits as to the types, amounts and degree of risk that
investment managers may undertake. These limits are
approved by the Board of Trustees and management
of the ISBI and the risk positions of the investment
managers are reviewed on a periodic basis to monitor
compliance with the limits. As of June 30, 2010 and
2010
June 30, 2009, the ISBI held no derivatives subject to
interest rate risk. The ISBI has not adopted a formal
policy specific to master netting arrangements.
The following table presents the fair value of
derivative investments exposed to foreign currency
risk as of June 30, 2010 and 2009:
2009

FX Forwards Rights Warrants FX Forwards Rights Warrants

Australian Dollar $ 367,196 $ • $ $ $ 111,868 $
Brazilian Real (510,309) (166.466)
Canadian Dollar (81,756)
Euro Currency 293,614 191,452 722 (133,149) 19,242 2,251
English Pound Sterling (603,992) (4,268,060) 297,813
Hong Kong Dollar 31,000 18,357 1,363
Indian Ruppe 625.478 (190,655)
Japanese Yen (2,226) 11,990
Norwegian Krone 5,355 7,157
Singapore Dollar (991) 106 7.076 .
South Korean Won 841 (257.427)
Swedish Krona (768)
Swiss Franc (353.497) (590,884) 362
Investments denominated
in U.S. dollars 65,354,031 20,352 41,244,749
$ (266,410) 227,807 $ 65,373,110 $ (5,594,545) $ 465,233 $ 41 ,247,000

Foreign Currency Risk

2010 2009
Foreign EqUity and Foreign Foreign EqUity and Foreign
Foreign Preferred Securities Obligations Foreign Preferred Securities Obligations
Australian Dollar $ 80,124,165 $ $ 64,845,908 $
Brazilian Real 52,217,836 33.224.878
Canadian Dollar 97,585,461 47,104,026
Danish Krone 29,767,544 22.597,007
Egyptian Pound 2,121,276 631,787
English Pound Sterling 333.465,799 291,255.325
Euro Currency 401 ,821 ,017 407,541 ,247
Hong Kong Dollar 60.278.477 39.652,995
Hungarian Forint 266,743
Indonesian Rupian 992,274
Japanese Yen 222,916,572 221.156,513
Mexican Peso 5.584.047 2,121,876
New Zealand Dollar 3,181,046 1,076,827
Norwegian Krone 15,111,055 9,277,231
Singapore Dollar 35,452,297 30,234.461
South African Rand 8,691,759 3.495,645
South Korean Won 39,303,338 21,353.474
Swedish Krona 21,927,042 15,868,385
Swiss Franc 121,970,148 124,169,874
Thailand Baht 1,081,519
Foreign investments
denominated in U.S. Dollars 199.498,179 44,409,906 147,034,828 33,237,090
Total $ 1,733,357,594 $ 44.409,906 $ 1.482,642,287 $ 33,237,090

General Assembly Retirement System, State of Illinois................................................................... .

13
 FINAI\ICIAL STATEMENTS

The ISBI's international portfolio is constructed on Interest Rate Risk

the principles of diversification, quality growth and
value. Risk of loss arises from changes in currency
exchange rates. International managers may also
engage in transactions to hedge currency at their
discretion. Certain investments held in infrastructure
funds trade in a reported currency of Euro based
dollars valued at $34,896,279 and $38,643,067 as
of June 30, 2010 and 2009, respectively. The table at
the bottom ofthe previous page presents the foreign
currency risk by type of investment as of June 30,
2010 and 2009.
Investment Liquidity
The IS81 holds investments in hedge funds, real estate
funds, private equity funds and infrastructure funds
that are considered illiqUid by the very nature of the
investment. Market risk exists with respect to these
investments as the IS81 may not be able to exit from
the investments during periods of significant market
value declines.
2010
Effective Weighted
Investment Type Fair Value
Government & agency obligations
U.S. Government $ 155,303,411
Federal agency 655,435,901
The ISBI manages its exposure to fair value losses
arising· from interest rate risk by diversifying the
debt securities portfolio and maintaining the debt
securities portfolio to an effective weighted duration
between 80 and 120 percent of the benchmark index.
Duration is a measure of a debt investment's
exposure to fair value changes arising from changing
interest rates. It uses the present value of cash flows,
weighted for those cash flows as a percentage of
the investment's fair value. The effective duration
measures the sensitivity of market price to parallel
shifts in the yield curve. As of June 30, 2010 and
2009, the ISBI bench marked its debt security portfolio
to Barclays Capital Intermediate U.S. Government!
Credit Bond Index. At June 30, 2010 and 2009, the
effective duration ofthe Barclays Capital Intermediate
U.S. Government/Credit Bond Index was 3.9 years.
At the same point in time, the effective duration of
the ISBI debt security portfolio at June 30, 2010 and
2009 was 3.8 years.
2009
Effective Weighted
Duration Years Fair Value Duration Years
4.8 $ 75,529.694 5.3
2.3 589,489,195 2.9.

Foreign obligations 44,409,906 4.9 33,237,090 4.7

Corporate obligations

Bank and Finance 246,087,134 4.8 159,283,917 4.0

Collateralized Mortgage Obligations 39,240,826 3.0 19,360,918 2.8
Industrials 496,856,383 4.8 425,239,911 4.4
Other 143,484,045 5.0 64,163,015 4.7
$1.780,817,606 $ 1,366,303,740

Investment Commitments Other Information

The ISBI's real estate and private equity investment The System owns approximately 1% of the net in­
portfolios consist of passive interests in limited vestment assets of the ISBI Commingled Fund as of
partnerships. The IS81 had outstanding commitments June 30, 2010 and 2009. A schedule of investment
to these limited partnerships of approximately expenses is included in the ISBl's annual report.
$463 million and $486 million, as of June 30, 2010
and 2009, respectively. Also, at the end of fiscal
For additional information on ISBI's investments,
year 2010 and 2009, the ISBI had outstanding
please refer to their Annual Report .as of June 30,

commitments of $154 million and $159 million,

2010. A copy of the report can be obtained from the

respectively, to separate real estate accounts. Also, ISBI at 180 North LaSalle Street, Suite 2015, Chicago,

at the end of fiscal year 2010 and 2009, the IS81 Illinois 60601.
had outstanding amounts of $147 million and $155
million, respectively, to infrastructure funds. The IS81
would fund outstanding commitments by utilizing
available cash and then selling liquid securities in the
portfolio as necessary.

General Assembly Retirement System, State of Illinois...................................................................

14
 FINANCIAL STATEMENTS

5. Administrative Expenses
A summary of the administrative expenses for the General Assembly Retirement System for fiscal years 2010
and 2009 are listed below.

Administrative expenses for fiscal years 2010 and 2009

2010 2009
Personal services $119,330 $117,817
Employee retirement contributions paid by employer 4,049 4,716
Employer retirement contributions 33,883 24,818
Social security contributions 8,848 8,695
Group insurance 21,158 22,493
Contractual services 76,439 88,043
Travel 1,255 608
Printing 1,670 1,910
Commodities 192 303
Telecommunications 1,169 999
Electronic data processing 2,390 2,682
Automotive 521 648
Depreciation 386 663
Change in accrued compensated absences 963 2.327
Total $272,253 $276.722

6. Funding - Statutory Contributions

Required & Contributions Made
payroll for the next 35 years until the 90% funded
On an annual basis, a valuation of the liabilities and level is achieved.
reserves of the System is performed by the System's
The total amount of statutorily required employer
actuarial consultants in order to determine the
contributions for fiscal years 2010 and 2009 was
amount of contributions statutorily required from
$10,454,000 and $8,847,000, respectively. The
the State of Illinois. For fiscal years 2010 and 2009,
total amount of employer contributions received
the actuary used the projected unit credit actuarial
from the state during fiscal years 2010 and 2009 was
method for determining the proper employer con­
$10,411,274 and $8,847,000, respectively.
tribution amount.

For fiscal years 2010 and 2009, the required employer
contribution was computed in accordance with the
State's funding plan. This funding legislation provides
for a systematic 50 year funding plan with an ultimate
goal to fund the cost of maintaining and administer­
ing the System at an actuarial funded ratio of 90%.
time relative to the AALs for benefits.
The schedule of funding progress, presented as re­
quired supplementary information (RSI) following
the notes to the financial statements. presents mUl­
tiyear trend information about whether the actuarial
values of plan assets are increasing or decreasing over

In addition, the funding plan provides for a 15 year Additional information as of the latest actuarial valu­

phase-in period to allow the state to adapt to the ation follows at top of the next page.

increased financial commitment. Since the 15 year

phase-in period ended June 30 2010, the state's The funded status of the System as of June 30, 2010,

contribution will remain at a level percentage of the most recent actuarial valuation date, is as follows:

Actuarial Actuarial Accrued Unfunded UAAl as a

Value of liability (AAl) AAl Funded Covered Percentage of
Assets -Prqjected Unit (UAAL) Ratio Payroll Covered Payroll
(a) Credit (b) (b-a) (alb) (c) ([b-a]/c)

$66,212,244 $251,764,834 $185,552,590 26.3% $14,775.000 1,255.9%

General Assembly Retirement System, State of Illinois................................................................... .

15
 FINANCIAL STATEMENTS
Valuation date: June 30, 2010
Actuarial cost method: Projected Unit Credit
Amortization method:
a. For GASB Statement No. 25 reporting purposes:
Level percent of payroll
b. Per state statute: 15-year phase-in to a level percent
of payroll until a 90% funding level is achieved
Remaining amortization period:
a. For GASB Statement No. 25 reporting purposes:
30 years, open
b. Per state statute: 35 years, closed
Asset valuation method: Fair value, adjusted for any actu­
arial gains or losses from investment return incurred in
the fiscal year recognized in equal amounts over the
five year period following that fiscal year.
Actuarial assumptions:
Investment rate of return: 8.0 percent per year,
compounded annually
Projected salary increases: 5.0 percent per year,
compounded annually
Assumed inflation rate: 4.0 percent
Group size growth rate: 0.0 percent
Post-retirement increase: 3.0 percent per year,
compounded annually
Mortality Rates:
Active and retired members: The UP-1994 Mortality
Table for Males, rated down 2 years.
Survivors: The UP-1994 Mortality Table for Females,
rated down 1 year.
7. Pension Plan & Other Post­
Employment Benefits
Plan Description. All of the System's full-time em­
ployees who are not eligible for participation in
another state-sponsored retirement plan participate
in the State Employees' Retirement System (SERS),
which is a pension trust fund in the State of Illinois
reporting entity.
The SERS is a single-employer defined benefit public
employee retirement system (PERS) in which state
employees participate, except those covered by the
State Universities, Teachers', General Assembly, and
Judges' Retirement Systems.
The financial position and results of operations of the
SERS for fiscal years 2010 and 2009 are included in
the State of Illinois' Comprehensive Annual Financial
Report (CAFR) for the years ended June 30, 2010 and
2009, respectively. The SERS also issues a separate
General Assembly Retirement System, State of Illinois................................................................... .
16
CAFR that may be obtained by writing to the
SERS, 2101 South Veterans Parkway, Springfield,
Illinois, 62794-9255 or by calling 217-785-7202.
The State of Illinois' CAFR may be obtained by
writing to the State Comptroller's Office, Finan­
cial Reporting Department, 325 West Adams
St.. Springfield, Illinois, 62704-1858 or by calling
217-782-2053.
A summary of SERS' benefit provisions, changes
in benefit provisions, employee eligibility re­
quirements including eligibility for vesting, and
the authority under which benefit provisions
are established, are included as an integral part
of the SERS' CAFR. Also included is a discus­
sion of employer and employee obligations to
contribute, and the authority under which those
obligations are established.
Funding Policy. The System pays employer
retirement contributions based upon an actuari­
ally determined percentage of its payrolls. For
fiscal years 2010, 2009, and 2008 the employer
contribution rates were 28.377%, 21.049%, and
16.561%, respectively. The System's contributions
to SERS for fiscal years 2010, 2009, and 2008
were $33,883, $24,818, and $17,862, respectively,
and were equal to the required contributions for
each fiscal year.
Other Post-Employment Benefits. The State
provides health, dental, vision, and life insur­
ance benefits for retirees and their dependents
in a program administered by the Department
of Healthcare and Family Services along with
the Department of Central Management Services.
Substantially all State employees become eligible for
post-employment benefits if they eventually become
annuitants of one ofthe State sponsored pension plans.
Health, dental, and vision benefits include basic ben­
efits for annuitants and dependents under the State's
self-insurance plan and insurance contracts currently
in force. Annuitants may be required to contribute
towards health, dental, and vision benefits with the
amount based on factors such as date of retirement,
years of credited service with the State, whether the
annuitant is covered by Medicare, and whether the
annuitant has chosen a managed health care plan.
Annuitants who retired prior to January 1, 199B, and
who are vested in the State Employee's Retirement
System do not contribute towards health, dental, and
vision benefits. For annuitants who retired on or after
January 1, 1998, the annuitant's contribution amount
is reduced five percent for each year of credited service
with the State allowing those annuitants with twenty
or more years of credited service to not have to contrib-
 FINANCIAL STATEMENTS

ute towards health, dental, and vision benefits. An­
nuitants also receive life insurance coverage equal to
the annual salary of the last day of employment until
age 60, at which time the benefit becomes $5,000.
The State pays the System's portion of employer costs
8. Analysis of Changes in
Reserve Balances
The funded statutory reserves of the Geneal Assembly
Retirement System are composed of the following:

for the benefits provided. The total cost of the State's a. Reserve for Participants' Contributions

portion of health, dental, vision, and life insurance This reserve consists of participants' accumulated con­

benefits of all members, including post-employment tributions for retirement annuities, survivors' annuities

health, dental, vision, and life insurance benefits, is and automatic annual increases.

recognized as an expenditure by the State in the il­

linois Comprehensive Annual Financial Report. The

b. Reserve for Future Operations

State finances the costs on a pay-as-you-!!}O basis. The This reserve is the balance remaining in the Judges'

total costs incurred for health, dental, vision, and life Retirement System from State of Illinois contributions
insurance benefits are not separated by department and revenue from investments after consideration of
or component unit for annuitants and their depen­ charges for payouts by the Judges' Retirement System.
dents nor ac­
tive employ­ Statements of Changes in Reserve Balances
ees and their Years Ended June 30,2010 and 2009
dependents.
Total
A summary Participants' Future Reserve
of post-em­ Contributions Operations Balances
ployment
benefit Balance at June 30,2008 $ 16,766,150 $ 58,639,793 $ 75,405,943
provisions, Add (deduct):
changes Excess of revenues over (under) expenses 1,635,408 (21,949,226) (20,313,818)
in benefit Reserve transfers:
provisions, Accumulated contributions of participants
employee who retired or died with eligible
eligibility re­ survivor during the year (1,526,048) 1,526,048
quirements
including $ 38,216,615 $ 55,092,125
Balance at June 30. 2009 $ 16,875.510
eligibility for
Add (deduct):
vesting, and (400,969)
Excess of revenues over (under) expenses 1,458,509 (1,859,478)
the authority
Reserve transfers:
under which
Accumulated contributions of participants
benefit pro­
visions are who retired or died with eligible
established survivor during the year (587,265)
are inCluded
as an integral Balance at June 30, 2010 $ 17,746,754 $ 54.691.156
part of the fi­
nancial statements of the Department of Healthcare
and Family Services. A copy of the financial state­
ments of the Department of Healthcare and Family
Services may be obtained by writing to the Depart­
ment of Healthcare and Family Services, 201 South
Grand Ave., Springfield, Illinois, 62763-3838.

General Assembly Retirement System, State of illinois................................................................... .

17
 FINANCIAL STATEMENTS

9. Accrued Compensation Absences 10. Equipment

Employees of the General Assembly Retirement
System are entitled to receive compensation for all
accrued but unused vacation time and one-half of all
unused sick leave earned after December 31, 1983 and
prior to January 1, 1998 upon termination of employ­
ment. These accrued compensated absences as of
June 30, 2010 and 2009 total $20,851 and $19.888.
respectively and are included in administrative ex­
penses payable.
Capital assets are capitalized at their cost at the time
of acquisition. Depreciation is computed using the
straight-line method over the estimated useful life
of the asset. The estimated useful lives are as fol­
lows: (1) office furniture· 10 years. (2) equipment
- 6 years, and (3) certain electronic data processing
equipment· 3 years.

Summary of the changes in equipment for fiscal years 2010 and 2009

2010
Beginning Ending
Balance Additions Deletions Balance
Equipment $ 21,078 $ 558 $ (793) $ 20,843
Accumulated depreciation (19.383) (386) 793 (18.976)
Equipment. net $ 1,695 $ 172 $ 1.867

2009
Beginning Ending
Balance Additions Deletions Balance
Equipment $ 20,848 $ 230 $ $ 21,078
Accumulated depreciation (18.720) (663) (19,383)
EqUipment, net $ 2,128 $ (433) $ 1.695

General Assembly Retirement System, State of Illinois....................................................................

18
 REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF FUNDING PROGRESS

Actuarial Actuarial Accrued Unfunded UAAL as a

Actuarial Value of Liability (AAL) AAL Funded Covered Percentage of

Valuation Assets * -Projected Unit (UAAL) Ratio Payroll Covered Payroll

Date (a) Credit (b) (b-a) (a/b) (c) ([b-a]/c)

6/30/05 $ 83,273,042 $ 212,905,654 $ 129,632,612 39.1% $ 12,851,000 1,008.7%

6/30/06 82,254,832 221,713,300 139.458.468 37.1 12,739,000 1,094.7

6/30/07 87,182,175 231,913,988 144,731,813 37.6 12,701,000 1.139.5

6/30/08 75.405.943 235,780.071 160,374.128 32.0 12,871,000 1.246.0

6/30/09 71.573.865 245,226.299 173.652.434 29.2 14.728.000 1,179.1

6/30/10 66,212,244 251,764,834 185,552.590 26.3 14,775.000 1,255.9

• For fiscal years prior to 2009. the actuarial value of assets was equal to the fair value of assets. Beginning in fiscal year 2009. the
actuarial value of assets was equal to the fair value of assets adjusted for any actuarial gains or losses from investment return incurred

in the fiscal year recognized in equal amounts over the five year period following that fiscal year.

SCHEDULE OF EMPLOYER CONTRIBUTIONS

Annual Annual

Required Required

Year Contribution Contribution

Ended per GASB Percentage per State Percentage

June 30 Statement No. 25 Contributed Statute Contributed

2005 $ 8,302,564 56.3% $ 4.674.000 100.0%

2006 8,593,196 48.4 4,157,000 100.0

2007 10,125,503 51.6 5,220.300 100.0

2008 10,672.535 63.8 6.809,800 100.0

2009 11,'29,440 79.5 8,847,000 100.0

2010 12.064,078 86.3 10.454,000 99.6

Notes to Required Supplementary Asset valuation method: Fair value, adjusted for any
actuarial gains or losses from investment return
Information incurred in the fiscal year recognized in equal
Valuation date: June 30, 2010 amounts over the five year period following that
fiscal year.

Actuarial cost method: Projected Unit Credit

Actuarial assumptions:

Amortization method:
Investment rate of return: 8.0 percent per year,
a. For GASB Statement No. 25 reporting purposes: compounded annually
Level percent of payroll Projected salary increases: 5.0 percent per year,
b. Per state statute: 15-year phase-in to a level compounded annually
percent of payroll until a 90% funding level is Assumed inflation rate: 4.0 percent
achieved Group size growth rate: 0.0 percent
Remaining amortization period: Post-retirement increase: 3.0 percent per year,
a. For GASB Statement No. 25 reporting pur­ compounded annually
poses: 30 years. open Mortality Rates:
b. Per state statute: 35 years. closed Active and retired members: The UP-1994 Mor­
tality Table for Males, rated down 2 years.
Survivors: The UP-1994 Mortality Table for
Females. rated down 1 year.

General Assembly Retirement System, State of Illinois..... ,. ............ ............ .................................... .

19
 SUPPLEMENTARY FINANCIAL INFORMATION

SUMMARY OF REVENUES BY SOURCE

Years Ended June 30,2010 and 2009
2010 2009
Contributions:
Participants:

Participants
$ 1.606,878 $ 1,703,025
Interest paid by participants
44,607 (5,450)
Repayment of refunds
29,118
Total participant contributions 1.680,603 1,697,575

Employer:

Pension Contribution Fund

10,411,274
General Revenue Fund
8,847,000
Received from reciprocating systems
9.422
Total employer contributions 8.856.422
Total contributions revenue 12,091,877 10.553.997

Investments:
Net investment income 1.411,133
Interest earned on cash balances 67,905
Net appreciation (depreciation) in fair value of investments (16,141,323)
Total investment revenue (loss) (14,662,285)
Total revenues (losses) $ (4.108.288)

SCHEDULE OF PAYMENTS TO COI\JSULTANTS

Years Ended June 30, 2010 and 2009
2010 2009
Actuary
$20,000 $22,000
Audit fees
28,044 28,704
Legal services
3,746
Total
$54.450

General Assembly Retirement System, State of Illinois.................. "................................................

20
 SUPPLEMENTARY FINANCIAL INFORMATION

SUMMARY SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS

Years Ended June 30, 2010 and 2009

2010 2009

Cash balance, beginning of year $ 3,705,657 $ 2,823,304

Receipts:
Participant contributions 1,605,311 1,724,075
Employer contributions:
Pension Contribution Fund
10,411,274
General Revenue Fund
3,686,250 5,728,233
Received from reciprocating systems
9,422
Interest income on cash balances 22,274 71,029
Tax-deferred installment payments 57,841 46,930
Cancellation of annuities 35,339 13,152
Repayment of refunds 55.870
Transfers from Illinois State Board of Investment 11,200,000 9,500,000
Miscellaneous 50
Total cash receipts 21.074.]59 J109289J
Disbursements:
Benefit payments:

Retirement annuities
13,764,107 13,023,821
Survivors' annuities
3,005,192 2,839,930
Refunds 248,654 81,119
Transfer to Illinois State Board of Investment 10,396,274
Administrative expenses 265,668
Total cash disbursements 16,210,538
Cash balance, end of year $ 3705657

General Assembly Retirement System, State of Illinois....................................................................

21
BKD.,
CPAs & Advisors 217.429.2411
225 N. Water Street, Suite 400
p.o. Box 1580
Decatur, IL 62525-1580
Fax 217.429.6109 www.bkd.com

Independent Accountants' Report on Internal Control over

Financial Reporting and on Compliance and Other Matters
Based on the Audit of the Financial Statements Performed
in Accordance With Government Auditing Standards

The Honorable William G. Holland

Auditor General
State of Illinois
and
The Board of Trustees
General Assembly Retirement System of the State of Illinois

As Special Assistant Auditors for the Auditor General, we have audited the financial statements ofthe
General Assembly Retirement System of the State of II1inois (System), as of and for the year ended
June 30, 20lO and have issued our report thereon dated February 17,2011. We conducted our audit in
accordance with auditing standards generally accepted in the United States of America and the standards
applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller
General ofthe United States. Other auditors audited the financial statements of the Illinois State Board of
Investment, as described in our Independent Auditor's Report on the System's financial statements. This
report does not include the results of the other auditors' testing of internal control over financial reporting
or compliance and other matters that are reported on separately by those auditors.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the System's internal control over financial
reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the
financial statements, but not for the purpose of expressing an opinion on the effectiveness of the System's
internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness
of the System's internal control over financial reporting.

A deficiency in control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, detect and correct
misstatement on a timely basis.

A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there
is a reasonable possibility that a material misstatement of the System's financial statements will not be
prevented, or detected and corrected on a timely basis.

Page 22

Praxiix": MEMBER,"
experience BKD GLOBAL ALLIANCE Of
INDEPENDENT fiRMS
Our consideration of internal control over financial reporting was for the limited purpose described in the
first paragraph of this section and was not designed to identify all deficiencies in internal control over
financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not
identify any deficiencies in internal control over financial reporting of the System that we consider to be
material weaknesses, as defined above.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the System's financial statements are free of
material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations,
contracts and grant agreements, noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The
results of our tests disclosed no instances of noncompliance or other matters that are required to be
reported under Government Auditing Standards.

We are currently conducting a State compliance examination of the System as required by the Illinois
State Auditing Act. The results of that examination will be reported to management under a separate
cover.

This report is intended solely for the information and use of the Auditor General, the General Assembly,
the Legislative Audit Commission, the Governor, the Board of Trustees of the System and System
management and is not intended to be and should not be used by anyone other than these specified
parties.

February 17,2011

Page 23
 General Assembly Retirement System

of the State of Illinois

Current Finding - Government Auditing Standards

June 30, 2010

No matters are reportable

Page 24
 General Assembly Retirement System

of the State of Illinois

Schedule of Prior Finding Not Repeated

June 30, 2010

No matters are reportable

Page 25